IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `D ', NEW DELHI)
BEFORE SHRI G. C. GUPTA, HON'BLE VICE PRESIDENT
AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. No. 2410/Del/2013
Assessment year : 2009-10
Shri Kayyum Ahamed, ` Vs. ITO, Wad 1(3),
Porp. VIP Publicity, Meerut
422/13, Shastri Nagar,
Meerut
GIR / PAN:AERPA2406F
(Appellant) (Respondent)
Appellant by : Shri Vinod Goel, Adv
Respondent by : Shri Gairav Dudeja, Sr. DR
Date of hearing : 14.05.2015
Date of pronouncement : 22.05.2015
ORDER
PER T.S. KAPOOR, AM:
This is an appeal field by assessee against the order of Ld. CIT(A)
dated 07.02.2013. The assessee has taken only one effective ground of
appeal in which he has raised his grievance regarding confirmation of
addition of Rs.47,93,474/- by Ld. CIT(A), which A.O. had made on account
of addition of unrecorded sales detected during assessment proceedings.
2. The brief facts of the case as noted in assessment order are that the
assessee is engaged in the business of advertisement and publicity and is
working as contractor. During the year under consideration, the assessee
filed return of income declaring gross receipt of Rs.47,87,763/-. However,
during assessment proceedings, the A.O. from Form 26AS observed that
gross receipts of the assessee were Rs.89,81,785/- and, therefore, assessee
2 ITA No.2410/Del/2013
was show caused as to why the difference of turnover as reflected in Form
26AS and as declared by assessee, be not included in the income of the
assessee. In reply, the assessee submitted that the audited balance sheet was
prepared from corrupted data and, therefore, the figures contained in P & L
account and balance sheet were wrong and, therefore, he prepared revised P
& L account wherein he declared gross receipt of Rs.89,81,785/- as reflected
in the form 26AS and also declared increased profits as compared to that
declared in the return of income. The assessee further submitted that there
was difference only in amounts of purchases of material and labour charges
and rest of the expenses were almost same as reflected in the original P & L
account. The A.O. did not agree with the contention of the assessee and held
that since as per the claim of the assessee, the data was corrupted and
therefore, the revised P & L account cannot be accepted and in view of
above, he made addition of Rs.47,93,422/- being the difference between
declared turnover shown in the return of income and the turnover reflected
in Form 26AS. Aggrieved, the assessee filed appeal before Ld. CIT(A) and
reiterated his submissions made before A.O. However, Ld. CIT(A) did not
agree with the contention of assessee and upheld the addition as made by
A.O. Aggrieved, the assessee is in appeal before us.
3. At the outset, Ld. A.R. submitted that during proceedings before Ld.
CIT(A), Ld. CIT(A) has called for a remand report from A.O. which was
placed at paper book pages B-1 and B-2. Inviting our attention to para 4 of
the report of A.O., Ld. A.R. submitted that the A.O. himself in the remand
report had recommended that gross receipt of assessee should be taxed @
8% whereas Ld. CIT(A) did not look into this aspect of A.O.'s repot and
confirmed the addition. Ld. A.R. submitted that the assessee during earlier
3 ITA No.2410/Del/2013
three years had been declaring net profit ranging 6% to 8% and the same
were being accepted, therefore in the current year also, the same ratio should
be accepted specifically in view of the recommendations of the A.O. during
remand proceedings. Ld. A.R. submitted hat the addition confirmed by Ld.
CIT(A) has given very absurd picture of P & L account wherein the net
profit comes out at 55% of gross receipts which is not at all believable and
achievable. Ld. A.R. further submitted that inclusion of entire turnover
without giving allowance for expenses is against law and there are various
decisions of Hon'ble High Courts wherein similar issue has been decided in
favour of the assessee. In this respect our attention was invited to decision
of Hon'ble High Court of Gujarat in the case of CIT Vs President Industries
250 ITR 654.
4. Ld. D.R. on the other hand submitted that assessee had filed return of
income after getting his accounts audited and a report u/s 44AB was also
filed and in the original P & L account as audited by CA, assessee had
declared lesser turnover and it is only when the assessee was cornered by the
A.O. on the basis of Form 26AS, the assessee submitted revised P & L
account wherein he included the undisclosed turnover and also inflated
expenditure and in support of inflated expenditure, the assessee did not
submit any bills / vouchers to substantiate his claim. He further invited our
attention to remand report as placed at paper book pages B1 and B-2 and
submitted that in earlier part of remand report, the A.O. had recommended
the addition of Rs.37,07,217/- on the basis of hidden investment in the
business. He argued that Ld. A.R. did not invite the attention to this aspect.
5. Ld. D.R. placed his reliance on the following case laws for the
proposition that entire sale needs to be added:-
4 ITA No.2410/Del/2013
CIT Vs Calcutta Agency Ltd. 19 ITR 191 (S.C.) .
CIT Vs Chandravilas Hotel 164 ITR 102 (Guj.)
CIT Vs Modi Store Ltd. 203 Taxman 123 (Del.)
5.1 Ld. D.R. further placed his reliance on the decision of Delhi Bench of
the Tribunal in the case of Shaktibhog Foods Pvt .Ltd. Vs ACIT in I.T.A.
No. 2777 to 2778/Del/2010 and also relied upon the case law of Ganesh
Rice Mills Vs CIT decided by Hon'ble Allahabad High Court and on the
basis of above case laws and on facts of the present case, Ld. D.R. strongly
argued that the addition made by A.O. needs to be confirmed.
6. We have heard rival parties and have perused the material placed on
record. We find from the written statement placed in paper book that
assessee had declared net profit for earlier three years as under and the
results declared by assessee were accepted during assessment proceedings:-
Assessment Year Gross receipts N.P. N.P. rate_____________
2006-07 38,05,126 3,04,411 8% (under 44AD)
2007-08 50,78,403 3,05,742 6% (as per books of a/c)
2008-09 29,57,136 2,36,589 8% (Under 44AD)
6.1 During the year under consideration, the assessee claimed that due to
fault in the data in computer, the balance sheet and P & L account prepared
and submitted to income tax Department contained wrong figures. We find
that the A.O. on the basis of the figures contained in Form 26AS had
cornered the assessee and, therefore the assessee had prepared revised P & L
account declaring reconciled turnover and also claimed revised expenses.
The A.O. without considering the increase in expenses, made the addition of
entire turnover whereas the fact remains that if there was concealed
turnover, there must have been some concealed expenses also which must
have been incurred and the A.O. should have considered the claim of
5 ITA No.2410/Del/2013
expenses also. Though the assessee did not furnish vouchers and bills for
the expense yet the A.O. should have taken guidance from the provisions of
Section 44AD which provides determination of net profits on the basis of
8% of gross receipt in the case of small traders. From the figures of
turnover of assessee, we find that assessee also falls in the category of small
traders and his undisclosed income should have been calculated on the basis
of certain percentage on undisclosed turnover. The Hon'ble High Court of
Gujarat in the case of CIT vs President Industries as relied upon by Ld. A.R.
placed at paper book page 45 has held that the amount of undisclosed sales
by itself cannot represent the income of the assessee and the sales only
represent price received by seller of goods but for achieving of such sales, it
had already incurred the cost. The findings of Hon'ble High Court as
contained in para 3 are reproduced below:
"Having perused the assessment order made by the A.O., the order
made by the Commissioner (Appeals) and Tribunal, we are satisfied
that the Tribunal was justified in rejecting the application u/s 256(1).
It cannot be a matter of an argument that the amount of sales by itself
cannot represent the income of the assessee who has not disclosed the
sales. The sales only represent the price received by the seller of the
goods for the acquisition of which it has already incurred the cost. It
is the realization of excess over the costs incurred that only forms part
of the profit included in the consideration of sales. Therefore, unless
there is a finding to the effect that investment by way of incurring cost
of acquiring goods which have been sold has been made by the
assessee and that has also not been disclosed, the question, whether
entire sum of undisclosed sales proceed can be treated as income of
the relevant Assessment Year answers by itself in the negative. The
record goes to show that there is no finding nor any material has been
referred to about the suppression of investment in acquiring the goods
which have been found subject of undisclosed sales."
6 ITA No.2410/Del/2013
6.2 The above case law relied upon by Ld. A.R. squarely covers the facts
and circumstances of the case, therefore, following the Hon'ble Gujarat High
Court we hold that entire turnover cannot be added to the income of assessee
and profits embedded in the turnover can only be taxed. The assessee did
not produce vouchers / bills to support the increase in expenditure in his
revised P & L account. Therefore, instead of 8% of turnover to be included
as profits on undisclosed turnover, we hold that an amount equivalent to
12% of turnover be included in the income of assessee. In view of the
above, the A.O. is directed to delete the addition on account of unrecorded
turnover and instead, make an addition equivalent to 12% of undisclosed
turnover.
6.3 The case laws relied upon by Ld. D.R. are distinguishable on facts.
The case law of Hon'ble Supreme Court, Hon'ble Gujarat High Court and
that of Hon'ble Delhi High Court relate to the claim of expenses wherein the
courts had held in favour of Revenue holding that primary onus was on
assessee to prove that expenses were incurred wholly and exclusively for the
purpose of business. Other case laws relied upon by Ld. D.R. are also
distinguishable.
7. In view of the above, the appeal of the assessee is allowed as above.
8. Order pronounced in the open court on 22nd May, 2015.
Sd./- Sd./-
( G. C. GUPTA) (T.S. KAPOOR)
VICE PRESIDENT ACCOUNTANT MEMBER
Date: 22nd May, 2015
Sp
7 ITA No.2410/Del/2013
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
True copy.
By Order
(ITAT, New Delhi).
S.No. Details Date Initials Designation
1 Draft dictated on 15/5 Sr. PS/PS
2 Draft placed before author 18, Sr. PS/PS
Draft proposed & placed before the
3 JM/AM
Second Member
Draft discussed/approved by Second
4 AM/AM
Member
5 Approved Draft comes to the Sr. PS/PS 22/5/15 Sr. PS/PS
6 Kept for pronouncement 22/5 Sr. PS/PS
7 File sent to Bench Clerk 22/5 Sr. PS/PS
Date on which the file goes to Head
8
Clerk
9 Date on which file goes to A.R.
10 Date of Dispatch of order
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